AYB240 - Superannuation and Retirement Planning Review Questions - Solutions Semester 2, 2021 Question 1 Identify the types of contributions that can be made to superannuation funds and whether they are considered concessional or non-concessional. Answer: Australian Master Superannuation Guide 16-000 · Made by: · Members - personal contributions made by an individual of a superfund · Others (e.g. employers, spouse, government co-contribution) " Two types of contributions · Concessional " Super guarantee (SG) payments " Other super contributions made by employers (e.g. salary sacrifice contributions on behalf of members) " Contributions made and claimed as an income tax deduction (see slide 10) " Subject to 15% tax on entry to fund " Since 2012-13 income year, individuals above a "high income threshold" are subject to an additional 15% contribution tax known as Division 293 tax · Threshold is currently $250,000 " From 1 July 2017, individuals under the age of 65, and those aged 65 to 74 who meet the work test, are able to claim a tax deduction for personal contributions up to the concessional contributions cap. " Prior to this the ability to make personal contributions was limited to self-employed people " Personal contributions are treated as concessional contributions . Non-Concessional " Made from after tax money " Business profits or from selling an asset · Spouse contributions " Tax-free portion of any foreign super transferred from overseas to Australian super account · Not taxed on entry to fund 1
Question 2 John is 57 and will be retiring at the end of the month. He plans to take $300,000 of his superannuation benefit as a lump sum to pay down his mortgage and travel. His superannuation balance of $1,200,000 consists of the following components: Non concessional contributions $145,000 Taxed in the fund 1,055,000 a) What is John's tax liability for the lump sum payment? b) John has been told he should consider an account-based pension. Assuming John has no other income, what would his tax liability be if he took the standard minimum pension instead? Answer: a) Proportioning rule: $300,000/$1,200,000 = 25% $145,000 * 0.25 = $36,250 (tax free) $1,055,000 * 0.25 = $263,750 Taxable benefit $263,750 Less low rate cap (225,000) Taxable income $38,750 Tax payable 5,812.50 Medicare levy 775.00 Total tax payable $6,587.50 b) Standard minimum pension is 4% Proportioning rule: $145,000 * 0.04 = $5,800 $1,055,000 * 0.04 = $42,200 Total pension $48,000 Taxable benefit $42,200 Tax payable 4,560 Medicare levy 844 Less offset (15%) (6,330) Tax payable NIL Medicare levy ** $844 ** Not a refundable offset so it can only reduce tax payable to nil. 2
Question 3 Jacinta, 62, has retired and commenced an account-based pension in July through her superannuation fund, drawing the reduced minimum pension. Jacinta's superannuation benefit consists of the following components: Crystalised pre July 1983 segment $138,000 Taxed in the fund component 425,000 Untaxed in the fund 230,000 What will be Jacinta's tax payable for the current financial year? Answer: Minimum pension is 2% Proportioning rule: